Retail Sales in U.S. Probably Rose on Job Gains

Retail Sales in U.S. Probably Rose on Job Gains

U.S. retail sales probably climbed in March, indicating an improving labor market is helping Americans cope with rising gasoline prices, economists said before a report this week.

A 0.5 percent gain would follow a 1 percent increase in February, according to the median forecast in a Bloomberg News survey ahead of Commerce Department figures April 13. Data this week on consumer and producer prices will probably show food and energy costs rose.

Macy’s Inc. (M) and Saks Inc. (SKS) are among retailers helped by a declining jobless rate and this year’s cut in payroll taxes. At the same time, bigger fuel and grocery bills are squeezing household budgets and eroding confidence, underscoring forecasts consumer spending cooled in the first quarter.

“Job growth is strengthening, which will be the main driver of spending,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. Nonetheless, “we’ve got higher fuel and food costs, and house prices are still falling.”

Higher gasoline prices probably contributed to the forecast gain in retail sales, which include purchases at filling stations and aren’t adjusted for inflation. Regular fuel jumped to $3.74 a gallon on April 7, the highest since September 2008, according to AAA, the nation’s biggest motoring organization.

Industry reports last week showed stores fared better than forecast. Retailers’ same-store sales rose 2.2 percent from March 2010, while the average projection was for a 0.5 percent drop, according to Retail Metrics Inc. Chains weathered a later Easter. In 2010, the holiday had pulled sales into March when it occurred on April 4, 20 days earlier than this year.

Topping Estimates
Cincinnati-based Macy’s, the second-largest U.S. department-store chain, reported an increase in sales, while analysts projected a decline. Luxury retailers Saks, Nordstrom Inc. (JWN) and Neiman Marcus Group Inc. also topped estimates.

The Standard & Poor’s Supercomposite Retailing Index has risen 3.8 percent this year through April 8, while the broader S&P 500 advanced 5.6 percent.

The Commerce Department may also report that sales excluding automobiles and service stations rose 0.4 percent in March after a 0.6 percent gain the prior month, economists said.

Industrywide light-vehicle sales ran at a seasonally adjusted annual rate of 13.1 million in March, after 13.4 million the prior month, according to researcher Autodata Corp. Sales jumped 16 percent at Ford Motor Co., based in Dearborn, Michigan, outpacing Detroit-based General Motors Co.’s 9.6 percent gain.

‘Solid’ Progress
“We continue to see good, solid signs of progress despite some of the challenges,” Don Johnson, GM’s vice president of U.S. sales operations, said on an April 1 conference call. “A recovering job market is going to be the most important factor for the U.S. economy at this stage, and we do anticipate that this is going to continue to improve.”

The economy created 216,000 jobs last month, the most since May 2010, the Labor Department said April 1. The jobless rate fell for a fourth straight month, to a two-year low of 8.8 percent.

The Labor Department on April 15 may report that the cost of living index rose 0.5 percent last month from February and was up 2.6 percent from March 2010, according to the Bloomberg survey median. Core prices, which exclude volatile food and fuel, likely rose 0.2 percent for a third consecutive month.

Labor Department figures earlier in the week may show wholesale prices and the cost of goods imported into the U.S. also climbed. So-called producer prices probably rose 1 percent in March, while import prices increased 2.2 percent.

Fed’s View
Federal Reserve officials noted at their March 15 meeting that the job market was improving and the 2011 cut in payroll taxes was boosting after-tax incomes. Still, falling house prices remained a drag on wealth, and higher oil and gasoline costs reduced purchasing power and weighed on consumer confidence, they said.

“While participants expected that household spending would continue to expand, the pace of expansion was uncertain,” policy makers said in minutes of the meeting released April 5. “Economic growth would strengthen over coming quarters while remaining moderate.” They also said the effects on inflation of the run-up in commodity prices “would prove transitory.”

The Fed’s Beige Book survey, due April 13, may reinforce the outlook for growth and inflation.

Manufacturing continues to lead the recovery, helped by an expanding global economy. Faster-growing markets such as China lifted demand for U.S.-made goods, helping to trim the trade deficit in February, the Commerce Department may report on April 12. The gap between exports and imports shrank to $44 billion from $46.3 billion in January, according to the Bloomberg survey median.

Also this week, Fed data may show industrial production rebounded in March, according to the Bloomberg survey.

Bloomberg Survey

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Release Period Prior Median
Indicator Date Value Forecast
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Trade Balance $ Blns 4/12 Feb. -46.3 -44.0
Retail Sales MOM% 4/13 March 1.0% 0.5%
Retail ex-autos MOM% 4/13 March 0.7% 0.7%
Retail exauto/gas MOM% 4/13 March 0.6% 0.4%
Business Inv. MOM% 4/13 Feb. 0.9% 0.8%
PPI MOM% 4/14 March 1.6% 1.0%
Core PPI MOM% 4/14 March 0.2% 0.2%
CPI MOM% 4/15 March 0.5% 0.5%
Core CPI MOM% 4/15 March 0.2% 0.2%
Ind. Prod. MOM% 4/15 March 0.0% 0.5%
Cap. Util. % 4/15 March 77.0% 77.4%
U of Mich Conf. Index 4/15 March P 67.5 69.0
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source: bloomberg.com